Daisy Group Buys NEG MBO Two

Published on 02/12/2010

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Daisy Group continues it acquisition strategy with the announcement today that it has acquired the entire issued share capital of NEG MBO Two Limited (NEG), a provider of communications services to the primary care sector in the UK, for an initial cash consideration of £23.5m.

NEG provides network services, telephony hardware, installation and maintenance support to over 2,000 customers, 1,200 of which are General Practitioners (GP); a market in which NEG has a strong market share. NEG trades under the ‘Surgery Line’ brand, a communications service designed specifically for GP surgeries and general practice which has been a key driver for the business. Daisy says NEG has proven its expertise and outstanding customer service through its high levels of repeat business and low levels of customer attrition, with low, single digit annualised churn on a revenue basis.

NEG has shown strong organic growth with management accounts for the 10 months ended 31 October 2010 with EBITDA of £3.4m year to date (FY 2009: £2.9m) and revenues of £11.2m. Through this period of strong growth, NEG has seen robust cash generation. The company has good revenue visibility with an average remaining contract length of three years, a quality earnings stream and gross assets of £7.4m.

Matthew Riley, Chief Executive Officer of Daisy Group plc, said, “The acquisition of NEG is a continuation of our stated consolidation drive in the fragmented reseller market. NEG has a proven track record for organic growth, further potential to grow, and provides the Group with a strong footprint in a market in which we believe we can increase market share further.
“Through this acquisition, we have acquired a large market opportunity and the potential to drive new verticals for the Group, giving us the ability to cross sell our data and mobile services and allowing us to provide a full unified business communications package to our enlarged customer base.”